Entrepreneur of the month: John Templeton
“If you want to have a better performance than the crowd, you must do things differently from the crowd.” — John Templeton
How can we talk about investment without knowing about a big one. An investment analyst and philanthropist, who left a lot for us to learn in this kind of world.
John Templeton was born Nov. 29, 1912 to a poor family in Tennessee. He attended Yale University and graduated in 1934 near the top of his class with a degree in economics. Afterwards he attended Oxford University and graduated with an M.A in law. After getting his degree at Oxford, Templeton started working for Fenner & Beane.
During the depths of the Depression in 1937 Templeton co-founded an investment firm that would become Templeton, Dobbrow & Vance. He was active in investing until the 1990s and during these many decades made some phenomenal investments. In 1999, Money Magazine called him “arguably the greatest global stock picker of the century.”
Templeton died on July 8, 2008 at the age of 95.
Investment philosophy
Templeton was unique in his classification as a value investor. He shared many characteristics with other legendary value investors and their ideas have influenced many of the great value investors of our time.
Investors like Templeton utilized fundamental techniques in their investment approach and did not rely on technical or momentum based investing. He always looked for cheap stocks and buying at times of pessimism. Templeton was a contrarian and therefore would be classified a value investor.
When thinking of Templeton’s investment philosophy two thoughts really come to mind: Cheap and global.
First let’s start off with cheap. In one of Templeton’s most famous transactions, he made a daring move in 1939. At the start of WWII Templeton called his broker and asked him to buy 100 shares of every stock trading under a dollar. He bought a total of 104 companies for a little over $10,000.
Four years later he sold this portfolio for $40,000. Templeton, like a typical value oriented investors, always thought the best time to buy was when people were scared and stocks were on sale. He did not limit his investments to a certain market capitalization.
Templeton was also one of the first true international investors. Many times he found the best bargains were outside of the united states. For example in the early 1960s, he realized the Japanese market was extremely cheap and started investing there.
However, Templeton did not simply look for bargains he looked for the best bargains. He also searched for countries and stocks where regulation was limited or sometimes even impossible i.e. newspapers due to freedom of press. In fact, Templeton looked for countries which were more capitalistic and had inflation under control.
In 1962, Templeton found companies in Japan selling at two to three times earnings. He found so many bargains in Japan that by 1970 60 percent of his portfolio consisted of Japanese equities. Towards the end of his life he expressed interested in Chinese equities.
Templeton believed that there were no simple formula for finding good stocks and there are over 100 factors that can be considered. However, Templeton had four criteria which he considered to be very important:
- P/E ratio
- Operating profit margins
- liquidating value
- Consistency of growth rates
- Quotes:
“Bull markets are born on pessimism, grown on scepticism, mature on optimism and die on euphoria.”
- “Invest at the point of maximum pessimism.
- “If we become increasingly humble about how little we know, we may be more eager to search.”
- “The four most dangerous words in investing are ‘This time it’s different.’”
